tv Whatd You Miss Bloomberg April 20, 2016 4:00pm-5:01pm EDT
scarlet: u.s. stocks closing higher with the number at the highest since september. joe: the question is what you miss? tracy: currency managers after the dollar falls. joe: china wants to get control of yum brands. we dig into what that means for the company and its investors when earnings cross in just minutes. guest says glencore is one of the greatest collapse and turnaround stories. we speak to mark patterson later this hour. we begin with our market minute -- stocks close higher but they came off their best levels of the session in the last hour or so. nonetheless, settling at the best since december. joe: some dispersion in the
--ups, we saw safety stocks but you can see the headline market moves not that dramatic. that is something we will be watching for. when you look at the big mover, coca-cola was the biggest drag on both indexes. it fell as much as 5.5%, about 18 months were -- 18 months worth. exceed analystt estimates. investors want to see more evidence of a turnaround and did not edit from the latest set of results. andut its year to date gain half and is only up 4%. joe: we keep saying this every day -- new lows in japanese bond
yields. again, hitting a brand-new low. an opposite story -- while equities were quiet, we saw a decent jump up in the curves with a two-year yield hitting .8 percent and the tenure jumping up to 1.85. let's check in on some currencies because even though everything has gone quiet in the stock market, there is quite a bit of volatility in currencies, specifically emerging markets currencies. the turkish currency is at its highest level after the central bank governor cut rates in line with forecasts. there was some concern about political influence on the central bank in turkey. take a look at the swedish currency -- it in a pretty big high just last week.
a lot of people talking about whether they will have to embark on stimulus measures but they have already done quite a lot. joe: check out oil. it has been the story of the week. the kuwait strike for why oil is buoyant. up nearly 4%,lly, helped by oil data out of the u.s. showing production continuing to decline. the theme is that it has just been going up. thatet: we have qualcomm just reported earnings, beating analysts estimates. $.96 on average, but revenue missing the consensus for when you look at the current quarter, they are getting a current forecast that could go higher
than analysts were looking for. , when itnsus estimate comes to third quarter etf forecasts, it comes in a little light, looking for as much as one dollar. qualcomm perhaps disappointing investors with its outlook. we have some headlines about how it says it has resolved in arbitration dispute with lg. let's take a deep dive into the bloomberg. function at this the bottom of the screen. i'm going to playoff on the japanese 40 year bond. we have to build off of it. the 40 year bond yield is in good company. the white line is this swiss 50 year yield, both yielding 30 basis points. both countries adopted a
negative interest rate. a good article talking about how the central banks are feeling the pain because they cannot put money into securities and reserve managers have to act aggressively. some investors will find that very ironic. i am looking at iron ore. remember in march, there is a big iron ore spike and every analyst said it was unsustainable and cannot last? up two dollars per ton, higher than it was at that level, so this broad commodity commoditieslk about everywhere doing really well and this huge spike, iron ore was in the 30's and now at 64, so we
are expressing some optimism about chinese demand. scarlet: and that turnaround came in december. joe: we were on here and we were like this can't last. it is amazing how much it zoomed up again. tracy: i think i have something slightly more pessimistic. have exchanged traded notes and we see this massive rally over the last couple of weeks. we see the vix fall and there's not so much fear out there. meanwhile, we have seen inflows and these two exchange traded notes really explode. this is people betting the vix is going to come back. it seems like there's a lot of
sentiment were people don't trust the rally or at least need to head their portfolios. likepeople are still there's a reservoir of skepticism. it's the last moment when everyone capitulates. scarlet: you can see all these charts and more on twitter. our first guest is the deutsche bank director of foreign investment strategy. begin, let's get down to the big news in u.s. currency. scarlet: the treasury department announcing harriet tubman will be replacing andrew on the center of a $20 note. she will be the first woman featured on u.s. paper currency. alexander hamilton will stay on the $10 bill. it is kind of funny as we talk about the transition to a paperless world that we are fixated on who is actually on
these dollar bills. sebastian: a currency is a symbol of our past and future. you talk about the values of standing up when everyone is asking you to be on your knees and it's only a positive message. is something you should essentially cherish. currency analyst, are you interested in the physical appearance of the currency? sebastian: i love collecting currencies from around the world. russia, brazil, free much anything. it is fascinating. it essentially gives you a sense of trust that there is a unit of account and is used for exchanges. it's also highly relevant because most of our transactions are on a non-paper basis.
of paying forct something is very important. you cannot pay your taxes with one cent coins. go back to the digital space where we look at lines going up and down the screen. one of the big surprises has been the weakness of the dollar. see further dollar weakness? has turnedthe dollar around in the right direction and is in the process of correcting stop what we have learned is currency can become quite unstable as like the dollar and on the yen side. you are starting to see the first elements of that normalization. scarlet: a quick interruption
because we have earnings from american express. earnings per share of $1.45 to beat consensus estimate of $1.33. i have to wonder if we are comparing like with like. at first blush, it does look like a beat. revenue also higher than anticipated. we know that american express has been facing some struggles because it has not been able to generate a stronger build business. you can see the stock ticking lower and now hire moderately. scarlet: it also reaffirmed its full-year outlook. when you look at what the next big trade will be in currency come along dollar has become a faded trade. long yen is too overcrowded.
what would be the catalyst for the next trade? sebastian: on the shorter term, as the consolidation of the dollar and the yen. that may last for a while because u.s. data probably won't be good enough for the feds reprice. once it does, you will get more of a dollar strength. the reversalm is of that process. scarlet: and the reason we are showing that swedish currency chart is people are looking very hard for the next big when her. topped inflation data analyst estimates. maybe that is the way to go. this seems to be the big debate. what exactly can central banks do in the face of rising currencies?
what can they do to drive it down? guest: the answer is difficult once the currency is cheap. it's much more efficient to hit it when it is expensive. helps to some extent. it becomes cheap, it is much more difficult to move it. in the case of the dollar, the fed wanted to weaken it and to some extent, it wanted to be a little more dovish. central banks are efficient and pretty good at doing what they need to do. tracy: always nice to have you on. scarlet: yum! brands earnings out in just a moment. ♪
mark: let's get to first word news. u.s. authorities say a nearly half-mile long tunnel leading from mexico to san diego, california has been discovered with more than a ton of cocaine and seven tons of marijuana seized. the tunnel extends 300 yards from house in tijuana to the yards tor and then 500 a fenced in lot in a san diego industrial area. with als say it was a real system, ventilation, lights , and a large elevator. six people have been arrested. the death toll from flooding in houston, texas is now eight. major highways remain close after the rains that started sunday overwhelm houston's
bayous. suggests most people are not facing the urgency of mobile warming because it has made the weather more pleasant. 80% of u.s. population lives in places experiencing utter weather than 40 years ago, but the study notes that if he trapping gases are not controlled, nearly nine out of 10 americans will have noticeably worse weather by the end of the century. obama met with the saudi king today as part of the visit that includes a persian gulf summit. the white house has said the region will focus on stability and the fight against islamic state and al qaeda. global news 24 hours a powered by our 2400 journalists in more than 150 news bureaus around the world. newset: we have breaking from yum! brands.
first quarter adjusted earnings per share of $.95, higher than the consensus estimate and better than the most optimistic estimate out there. in terms of its first quarter china unit comparable sales, that was up 6% for the quarter. china sales of percent when the consensus estimate is for a 2.1% increase. this is a big beat on the china side and china matters so much because yum gets half of its revenue from china. you were looking at the china separation and how that is on track. track to be spun off by the end of the year. overall, sales of 5% and kfc unit sales are a bit behind estimates. a little bit of negative news there but the big beat on china, sales seems to be the headline.
scarlet: and they are raising their profit growth guidance to 12% as well. it is all about the china numbers and comparable sales, isn't it? is.t: it it's half the revenue and almost half the prophet. as does china, so goes yum! brands. everyone is looking to see when they split this off, what does it look like. tracy: we know that china has been on a buying spree. is there something in particular about the yum! brands that attract china to that company? there's more local competition, but is still a huge player. it has been around and is an established brand. it's a well-known player in the
market. scarlet: because it is well-known, it is not the sexy brand at once was when it launched in the 80's. guest: ucf, when there is a new shake shack that is open. that's part of the reason they have struggled in china. there's not that buzz, but phil very big. kfc does extremely well in china. read through these results to tell us about anything in the economy there or the chinese consumer? tough.i think it is the big thing is the supplier scandal. it is tough to separate that out. likestarting to look supplier thing is in the past. that's the biggest news to me. assuming they get money
from china, there's talk about a dividend increase or share buyback. guest: those are things that they have said. there's the question about whether it's a good use of capital. the big thing is how they do in the u.s. taco bell has been a good thing, pizza hut, not so much. i think they have to turn their attention to getting kfc and pizza hut back on jan -- back on track. coming up, a lot going on in the global markets after the meeting in the oval office old without an agreement. ♪
scarlet: president obama arrived in saudi arabia and met with the king as the kingdom faces economic pressure from the fall in oil and a costly proxy war with iran in syria and yemen. at the companyeo that uses analytics to address some of the world's challenges. chooserabia appeared to politics over economics when pulled out of the dough hot discussions. is that a canary in the coal mine in terms of how an oil-producing nation can reach an agreement in the future?
it is a kind of canary in the coal mine. but this has not been anything new. and is basically a cartel for a cartel to court made anything from production to a quota, they need to be able to trust each other. because they don't trust each other, they fail to reach an agreement. what we see going on with opec is nothing new. . this has been a high point in their failure because of some of the stuff saudi arabia has been involved in politically. but it is nothing new. joe: the question of his opec said it feels like such a cliche at this point. delhomme talks failure and oil has strengthened and than we saw the story about a kuwait strike and the kuwait strike ending. that did not seem to have any
effect on the market. on relevant tong the market in the short or medium term? guest: i don't think so. i don't think what is going on in the region is that relevant with some of the global macro trends we are seeing. if they were able to coordinate some type of quota, we would see a better rebound on the price of oil. i don't think the things that are going on in the region have a significant impact. scarlet mentioned politics driving saudi arabia. what are the levers the country can pull in terms of offsetting declining oil prices? we have seen it cut back on markets and cut international debt markets. what else is there? guest: one of the levels they
could have pulled is coordinating a quota price. that means they would have to sacrifice the market share. that would have required for them to reduce their production doubles which they are unwilling to because iran is entering the market. the iranians are willing to set a vote of that they do not feel like they should be party to reducing their production as they are just beginning to reenter the market with relief from sanctions. joe: that seems to make sense from iran's perspective. if you are under sanctions, why would you want to immediately outputnds joining this phase? to your point, that is exactly what is going on. it is the classic case of the prisoner's dilemma. because they don't trust each other and it would require a
short-term sacrifice for certain members for a longer-term price stability, we do not see that happening. scarlet: you talk about how oil prices and violence to really have a correlation. talk to us about that. guest: that is absolutely true. we looked at the price of oil going back 15 years for all the major producers and exporters and we showed that as the price of oil goes up, violence goes up . if the price of oil goes down, violence or down. instability, it is for factors other than the price of oil and declining prices are much more likely to reduce prices rather than increase it. tracy: thank you for joining us. scarlet: coming up, is corporate debt in the energy industry reaching unsustainable levels?
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x1 makes it easy to find what you love. call or go online and switch to x1. only with xfinity. scarlet: breaking news on united -- first quarter adjusted earnings were higher than analysts were looking for. revenue matched consensus bang on. the metric use measures profitability for -- down at 7.4%. for the second quarter, united season down between 6% and 8.5%. continued deceleration there. let's get to mark crumpton with first word news. mark: two michigan regulars and a municipal employee in flint
face evidence tampering and other charges in connection to the city's lead tainted water crisis. >> they failed to discharge their duties. they failed in their responsibilities to protect the health and safety of families of flint. they failed michigan families. indeed, they failed us all, i don't care where you live. mark: when asked if there would be more charges, he said i can guarantee you. have taken aakers step in directing another $126 million to deal with the water crisis in flint, including $25 million to replace underground led types. five new orleans police officers pleaded guilty to lesser charges of the deadly shootings on the danziger bridge following hurricane katrina. most will be released between one and six years. the guilty pleas come after the shooting deaths of two unarmed
people and the wounding of four others on the bridge less than one week after levee failures swamped the city. the trouble department of veterans affairs is a new chief watchdog. president obama nominated him to be the v.a.'s inspector general in october. lawmakers have long sought a permanent inspector general to provide timely decision on benefits. the sweltering heat that has gripped india for three weeks has killed more than 160 people. temperatures are as high as 113 degrees in some parts with relief from monsoon rains likely weeks away. india is also dealing with severe water shortages and drought affecting more than 300 million people, about one quarter of the country's population. global news 24 hours a day powered by our 2400 and lists in more than 150 news bureaus around the world. let's get a recap of
today's market action. when you look at equities, at one point, the s&p 500 was at its best levels since july. that rally faded in the afternoon. sinceat its best level december but nothing like the gains we saw earlier. --: a big day for oil today it might come as a surprise because of the kuwait strike. some industry data and production data. balanceback into despite the failure of the talks. one thing i was looking at was the high yield etf. it has been following the direction of oil and is up today, but not as much as you would think given the price action in crude. scarlet: "what'd you miss?"
where one company succeeds, another fails. lenders lifeline from when it comes to bankruptcy. lenders have yanked $5.6 billion of credit from oil and gas reducers, making it the most severe retreat since crude began tumbling in mid-24 team. companies struggling to survive by more time? our next guest has decades of experience. he joins us now. tracy: i'm going to jump in right here because when i feel we talk to distressed debt investors, they are always talking about the next wave of opportunities being on the horizon. we see all the pain on the energy sector and it's now time to come in. obviously, there was a temporary slump in high yield
bonds a couple of years ago and there's been a nice many recovery. but if you look at the default rate, it is obviously moving up and not down. longer-term, you are going to want to wait your turn but it is too late in the oil sector. it's obviously time to go into the sector. last year, there was a 400% increase in distressed junk bonds. about 67 companies went into default. 14 in the prior years and has been a surge in the sector. we have passed the best opportunity to invest, but it is not too late when you look at chesapeake.
i don't know what the banks line, but a $4 billion rolled over sounds like a good defense. further is not too late for a company like this? guest: there was a coin toss -- you are all aware that the banks and oil company boards and ceos understand that the banks reappraise the lending to oil companies twice a year. these are terrifyingly good or bad date. there is no question in my view that it is the size of the debt. scarlet: we talk about distressed categories that are
high yield, but what about when core, which is investment-grade? guest: i scratch my head inking about the last investment-grade company that -- in fact it is highly asymmetrical and probable for an investment-grade company to go into bankruptcy. we recall glencore went public at about 560 pence. at 67 pence --g they dropped 90% of their value. this is a great company run by one of the world rate ceos and great trading in lots of things. taken massively aggressive dividends and asset sales to some of the best
investors in the world. an excellent investment group. get theused cash to agricultural business under their control. debt and have of threatened to pay down their debt in the next couple of years. is the behavior of a ceo in board that determine they don't go into bankruptcy. it is the resilient, obstinate causes it to go under. full disclosure -- i made up egg investment in glencore, so you can cut me off and say i shouldn't talk about it but i am very happy that it is trading at 170. scarlet: and we should mention that heater is a senior nonexecutive director at glencore. tracy: it makes me think there's
a lot of cash still on the sidelines. does that end up extending the current default cycle? these going to give companies a lifeline? would answer the question by looking at various industries. the ones looking to take control .nd the hedge fund investors this is a good time to swim laps in the distressed pool. they are waiting for the companies to make -- those that will fail -- to fall into the bucket and then act to turn them around and save them. scarlet: when you look at the debt to ash that ratio, starting to creep up. -- that you asset ratio, it is starting to creep up. guest: debt to asset in modesty
companies i think is a highly relevant statistic. pro we typically look at is forma cash flow. if the only thing that's going to rescue the company. in these kinds of industries, the asset ratio is a critical one. see those i have filed and cropsey, in the liquidation process, the attained value is a fraction of what everyone thought at the beginning of the and cropsey process. that comes back to the chesapeake question of why you think the banks extended it. i think it was in their interest as much as everyone else is. up, the new ceo return toays the profitability is a hardest challenge of his professional career. .e have an exclusive interview
scarlet: time for the bloomberg business flash and a look at the biggest business stories and that is right now. american express is posting profits that beat analysts estimates thanks to an increase in customer spending. earnings per share were $.12 better than analyst estimates. qualcomm hurt by slowing demand for high-end smart phones -- the egg is mobile phone chipmaker forecast sales and profits that may trail analyst estimates.
their chips are the main proponents in the most expensive smartphones. yum! brands which is planning to spin off its china unit saw sales climb. their operations in china are starting to rebound after scandal,g with a prior more competition and a tough economy. yum! brands says operating profit will rise up from its earlier estimate of 10%. that is the bloomberg business flash. tracy: low oil prices have caused mexican owned pemex production to plummet and its new ceo says production will be falling further. he's carving $5.7 billion from the companies jet after $32 billion in losses last year. theas asked which assets company is prepared to sell or lease back.
>> we are prepared to talk about and put on the table assets -- pemex was a vertically integrated monopoly, so a lot of things in the new rules don't necessarily have to be run by pemex. a fertilizere company or midstream -- is that -- open toe mark sale? guest: we will want to retain part of the equity, but we do not have to maintain the majority. we are open to having a majority operator. erik: in refining and where else? guest: the entire structure from up stream to refining to downstream. talks withou in potential buyers? guest: i would like to call them
partners. i would call them potential partners. are we talking about oilncial partners or companies. the oil companies are from where? guest: from everywhere. they are global by nature. guest: they are very interested in pemex. oil companies like to go into a country without a domestic partner. pemex is a good partner. erik: you say pemex has a lot of room to cut. where? guest: there's love in efficiency in the company and we are going to go through them. we can improve our negotiating we finds with which specialized equipment. there is room to maneuver. erik: what about jobs?
guest: i'm very conscious about one thing. jobs is not an and in itself. erik: but it is a sign of efficiency. guest: profitability is the name of the game. erik: exxon mobil produces twice as much oil with half as many employees. guest: we will take the labor decisions we need to take based on profitability. wage bill is only 50 billion paces, that would only take care of half of the country this year. that is the end game. understood, but part of the region -- part of the reason
i asked the question is. andcan it be good for pemex how can it be good for mexico? own.: we cut pemex's that's the key issue and that makes me optimistic. like tomething i would know -- what is your incentive to push for real change? this company has had eight ceos in the past two decades. why would you want to do anything so risky when is a strong likelihood that you will be doing something else three or four years from now? me answer with what i did last time. anymore. insolvent goodommitted to being a
public servant and i want to get this done. it is the biggest challenge in my professional life and if i feel good about myself, it will be good for pemex and more important, it will be good for mexico. this administration is committed to changing. did notident said we come here to just administer. we came here to change. you are confident he will protect you from the unpopular decisions you are bound to make mark -- down to make? guest: yes. up, threeoming must-see charts, next on the equity markets.
scarlet: so far this earnings season, profits are beating analysts estimates while sales topped the consensus by a smaller margin, less than 1%. it's still early days. here with three chart on the equity markets is all running. -- oliver run it. predicted coming in that things have gotten so withdrawn in terms of enthusiasm. let's look at what is happening versus last quarter. there are 11 or 12 companies that have reported. more so, the degree to which they are beating is stronger than the last quarter.
things on a raw data standpoint, the numbers don't look so hot, but relative to what people are expecting -- analysts successfully created a low margin. oliver: we now surpassed 2100 on the s&p and this helps, no doubt about it. tracy: does no one care anymore that we see analysts ratcheting down their expectations? oliver: unless you have a big negative thing on the horizon with stocks, unless you have an indication that there's a risk stocks are getting a big help and that's a big part of the story. not only were they short, but they were not long on the other side. they are scrambling to catch up
to the rally. let's go to a story that has nothing to do with earnings. investors can now by the braves. is see this chart and it really weird looking. you think everyone is getting this story wrong. oliver: this stems from john malone -- he split up the company and one of them is a tracking stock that follows the atlanta braves franchise. down going all the way down to 20, a lot of people got up in arms over this. happens duringt the day. a few trades were really far out there, but this is not the common stock the way we think of equity.
-- there's an adequate indicator of supply and demand. somebody else in the market determines it is worth less. it's an artifact of how these things go to the market. i'm going to read a couple of headlines -- i'm violating journalistic unspools here. malone's atlanta braves. tanks. let's be reale is -- the atlanta braves are terrible. it just took a while for investors to figure out what this security is worth. opinions on both sports and stocks. scarlet: coming up, what you
scarlet: "what'd you miss?" tracy: the ecb rate decision tomorrow at 7:45. joe has flag this as the least anticipated ecb meeting for a long time. joe: sorry to bust the height. also looking forward to initial jobless claims that amount tomorrow. they have been so rock solid. we will look to see if that continues. scarlet: and don't mess -- don't miss alphabet of a formally known as google, and microsoft reporting after the bell tomorrow.